Insurers Differ on Rate Cutting, Overriding Commission

ThisDay

Commissioner for Insurance, Mr Fola Daniel

Ebere Nwoji

Insurance industry operators are currently divided in their opinions on the continued existence of some unprofessional practices such as rate cutting and over riding commission in the industry.

While some industry operators posited that rate cutting  is still high  in the industry, especially among insurance brokers, to the extent that perpetrators now corner businesses belonging to ethical brokers, industry leaders, especially the regulatory body argued that given their strict supervisory role, the problem of rate cutting and overriding commission no longer exist in the industry.

Speaking at the February edition of the bi monthly members' evening of the Nigerian Council of Registered Insurance Brokers(NCRIB) president of the council, Mr. Ayodapo Shoderu, decried  the continuous existence  of the  twin problems, saying  they still affect ethical operators.

"I am distressed to, again, address one of the unpleasant trends that have continually affected our operations as insurance brokers, and this is the pervasive incidence of rate cutting.  You will recall that at the inception of my tenure, my team visited the Commissioner for Insurance who warned brokers that indulged in collecting overriding commission from insurance companies to desist from the act, warning that the commission will not hesitate to sanction such unethical players."

"This and sundry issues we were to discuss more intensively with the Nigerian Insurers Association. It was our belief the forum should be a good platform to initiate steps towards upward review of the existing brokerage commission. Unfortunately, the meeting is yet to hold from the NIA end", he said.

According to him, it was more regrettable that the council has continued to receive an avalanche of complaints about some ethical brokers losing businesses to those who continually cut rates or quote uneconomic rates.

Insisting that the trend was killing  the brokerage profession and must be condemned in its entirety Shoderu said it was the intention of the brokers' Council to continually promote high ethical standards, saying  it  is the only way the present generation of professionals could bequeath a sound and solid profession to the coming generation.

"Anything short of this is unacceptable. Also, I must stress that it will be most difficult for me or the governing board henceforth defend any member that violates the law or directive on insurance broking operation,” he said.

However, the  Commissioner for Insurance, Mr Fola Daniel recently said  the problem of overriding commission had abated in the industry.

Daniel, who spoke at retreat organised by the National Insurance Commission (NAICOM),  noted that  instead of overriding commission,  what the industry complains  about now is over regulation and too much inspection.
He said last year, the commission inspected some companies’ books over six times including the big players in the industry.

The commissioner said the regulator was  so thorough in its inspection that once it sees any big business transacted in the accounts book of any firm it would screen to see if there is any big amount paid out by the same company at the period.

He explained that once it  discovers such payment it must probe beneath the surface to trace the recipient of such amount and the insurance firm in question will be interrogated on what the amount was paid for.

"At Annual General Meetings, you hear them complaining that NAICOM  is slamming penalties on them. I remember that in one of the forums we had with the chief executives, we apologised to them saying sorry, we have been slamming you with penalties that are not deterring you from misbehaving and they said sorry, we have repented we will not do it again, but they are still doing it", the commissioner stated.

Expressing the determination of the commission to severely punish the industry offenders who engage in  unprofessional misconduct this year, the Daniel  said since NAICOM started, it had not fined any company up to N10 million.

He disclosed that this year  the commission has fined a company N62 million, insisting that as people are becoming hardened in breaking the law, the commission is re strategising on how to effectively deal with them.

"So if you know them talk to them, if insurance mechanism is abused in such a way that we can't pay claims we are in trouble"' he stated.

He said in doing this, the commission does not wish to kill the industry but is trying to restore sanity in the  system.

He spoke on recent complaint by insurance managers on its approval of big businesses that require other co insurers, saying that insurance companies are in the habit of bringing a big business they know they may have only five per cent capacity.

According to him, some firms will bring names of five or six insurance firms that have lower capacity with them so as to cede the rest of the business abroad.